Create a WIF that shows the highest net interest margin you can generate. Don't worry too much about other measures of risk & return like Asset Quality, Liquidity, Capital, etc. You must maintain at least 6% risk-based-capital, and you can have no more than 15% risk-based-capital. This is a mini-competition of sorts: can you generate the highest net interest margin % after 8 quarters? You can only create three WIFs in your attempt to get the highest margin. Name the WIFs "NIM #1", "NIM #2", "NIM #3".
Pick the WIF with the best NIM%. Prepare a short presentation (5 to 6 minutes, good outline, practice your presentation skills). At some point during the presentation address/discuss the following questions:
- What is the Net Interest Margin Percentage? (Look at the periodic Key Ratio Report, Net Interest Margin % in the last quarter).
- Look at your balance sheet composition as of the last quarter. What percentage of assets is in Securities, Loans, and overnight investments (Fed Funds Sold)?
- Look at your balance sheet composition as of the last quarter. What percentage of assets is funded by Non-Maturity Deposits, CDs, Structured Borrowings, and overnight funds (Fed Funds Purchased)?
- What is the projected total asset size of the bank in this WIF?
- How would the reality of competition impact this WIF?
- What rate environment would be most beneficial for this WIF?
ALSO, repeat the exercise from above: Create three WIFs in an attempt to generate the highest margin. However, this time you must limit the size of the bank i.e. after 8 quarters the bank can be no larger than $275 Million. Call your 3 WIFs "L-NIM#1", "L-NIM#2", "L-NIM#3".
Pick the WIF with the best NIM% and discuss the results as part of your presentation.
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